What: It has been an absolutely awful year for Halcon Resources Corp. (NYSE:HK). The stock is down nearly 60% since the start of the year after falling another 10% today. Worse yet, the stock is now down about 80% from its 52-week high.
Today's downdraft was caused by another big drop in oil prices, which were off by 4.2% of the day. More bearish sentiment from analysts, who continue to cut price forecasts, caused another big drop in oil prices today.
So What: Today's sell-off in Halcon Resources Corp, is just a continuation of the panic selling we've seen as oil prices keep free-falling. Investors are very worried that not only could oil prices go lower, but also that low oil prices are here to stay. In the short term that's not too big of a worry for Halcon Resources, as the company typically hedges 80% of its production for up to two years. However, because it outspends its cash flow, and uses debt to bridge the gap, the company has dug itself quite a deep hole. There is now growing concern that the fall in oil prices means the company will be one of many that won't be able to keep current on its debt.
Now What: Halcon Resources' future debt issues are beginning to really rattle investors. If oil prices don't start to recover, the company could be in a lot of trouble less than two years down the road. That's why investors need to tread carefully with this stock, as those worries will cause it to be very, very volatile until oil prices stabilize.
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